U.S. Food Producers Say Duty-Free Imports Will Hurt Dairies, Farmers : Trade: A section of law is intended to help three Eastern Europe countries, but could also benefit 130 others. Domestic growers fear a flood of foreign goods that would drive many out of business.

U.S. vineyard operators, dairy farmers and mushroom growers are concerned that they will be the losers in President Bush’s move to aid the emerging democracies in Eastern Europe.

At issue is whether mushrooms, grape wine and Goya cheese, a hard cheese similar to Parmesan, should be allowed into the United States duty-free under a section of U.S. trade law, the Generalized System of Preferences.

Although a proposal to permit the duty-free imports is intended to benefit Poland, Czechoslovakia and Hungary, any of the 130 countries under the GSP program could also ship the products to the United States without paying a tariff.

Domestic producers fear that the cheaper imports, made even cheaper because there would be no tariff, would disrupt the already troubled dairy industry and force struggling mushroom farmers out of business. Grape growers are also worried about the implications.

The GSP program is intended to help poor countries develop markets in the United States by allowing them to ship certain products duty-free. However, the imports are not supposed to displace domestic producers.

The Bush Administration spent nearly a year studying and debating whether to add grape wine, mushrooms and Goya cheese to the list of GSP products. It finally rejected the petitions from Eastern and Central Europe on May 3, 1991.

But 97 days later, on Aug. 8, 1991, the Administration announced that it would reconsider the issue. While the rules call for a three-year waiting period before a petition can be resubmitted, the President can waive that wait.

Sen. Harris Wofford (D-Pa.), and other members of Congress have questioned the decision to reconsider the matter so soon after the petitions were rejected.

According to Julius L. Katz, deputy U.S. trade representative, the President’s trade enhancement initiative for Central and Eastern Europe was announced in March 1991, about the time that decisions in the GSP review were being completed.

In May, government experts visited the region and found the economic problems facing Central and Eastern Europe “were more daunting than originally thought,” Katz said.

The experts also reported that expansion of exports from those countries was essential to their economic success and stability, Katz told Wofford in a November letter.

“Based on the findings and recommendations of the team of experts,” Katz wrote, “the Administration has determined that the extraordinary importance of economic transformation in Central and Eastern Europe merits at the very least the reconsideration of past decisions that affect exports from the region.”

But Wofford contends that efforts to aid Eastern Europe should not be done at the expense of U.S. farmers. He believes that Pennsylvania’s dairy and mushroom industries would be especially hurt.

The state’s mushroom farmers produce 54% of the nation’s fresh mushrooms, worth $151 million, and 46% of processed mushrooms, worth $94 million.

The number of mushroom farmers has been falling in recent years, from 502 in 1988-89 to 460 in 1990-91, according to the Agriculture Department. Officials say producers operate on the slimmest of margins.

“Given the uncertainty of the current (international trade) negotiations, coupled with the review of these GSP petitions, I see our domestic markets being given away to our foreign neighbors,” Wofford said last week. “All of this at a time when we should be strengthening markets and trying to support our farmers.”

Supporters of the petition acknowledge the economic concerns but question whether the additional imports could seriously hurt U.S. producers.

According to the Agriculture Department, Goya cheese imports totaled just 6.6 million pounds last year, out of total cheese imports of 298 million pounds. All cheese imports account for just 1.5% of domestic consumption.

But a New York City cheese importer-exporter, Thomas May, vice president for Trugman-Nash Inc., contends that if the 25% duty is lifted, cheaper imports would flood the country.

And the milk that would have gone into that Parmesan cheese could end up instead as surplus and drive down raw milk prices, officials said.

“The State Department doesn’t realize the can of worms it’s opening up with this cheese,” May said.